Comparison of Alternative Safety Net Programs for the 2000 Farm Bill

As Congress begins its debate for the 2002 farm bill, there have been calls for a counter cyclical safety net that will provide a better basis for targeting longer term planning than exists with ad hoc emergency assistance. Further subsidization of the multi-peril crop insurance (MPCI) program has been proposed, as well as reliance on a farm and ranch risk management (FARRM) account to help farmers. A whole farm revenue income support program and several variations of national income supplement programs have been put forward. A comprehensive analysis of different safety net alternatives using a common methodology is needed so farmers and policy makers can make objective comparisons. The objective of this paper is to quantitatively analyze the economic effects of alternative safety net/insurance programs on farmers in the Southern United States. The objective is accomplished by simulating representative crop farms in the South over the 2001-2005 planning horizon for alternative safety net options. The simulated net present value distributions for the farms are compared using certainty equivalents to determine the value of alternative safety net options to feed grain, cotton and rice farms in the South.